Opinion
No. X04 HHD CV 07 5026084 S
November 19, 2010.
MEMORANDUM OF DECISION ON MOTION TO DISMISS (#458)
The court held a hearing on November 4, 2010 concerning the defendants' motions to dismiss. After considering the parties' arguments, the court issues this memorandum of decision. For the reasons set forth below, the motions are denied.
The defendants/counterclaimants are Signature Properties, LLC, Stephanie Lord Drake, Andrew J. Julian, Maureen Julian, and Michael Murray. The defendants Andrew J. Julian and Michael Murray filed a motion to dismiss, which the other defendants adopted.
I Background
The defendants move to dismiss, arguing that the original plaintiff in this case, J.E. Robert Company, Inc. (J.E. Robert), lacked the standing to bring this foreclosure action, as it was never the holder of the note and mortgage which is the subject of the action, and, since J.E. Robert had no standing, no action was commenced, and this action is void ab initio. They assert that the court lacks subject matter jurisdiction, all previous orders of the court should be vacated, and a judgment of dismissal should enter.
In response, the plaintiff, Shaw's New London, LLC (SNL) contends (1) J.E. Robert had standing when it initiated this action in 2007; (2) even if J.E. Robert did not have standing, the substitution of SNL as party plaintiff in November 2007 cured any defect in standing; and (3) even if J.E. Robert lacked standing and the substitution of SNL did not cure such purported defect in standing, the court still retains jurisdiction pursuant to General Statutes § 52-123. In addition, SNL asserts that the motions to dismiss are a meritless delay tactic.
This matter, which was filed in court in August 2007, concerns a note, a mortgage of commercial property located in New London, Connecticut, a guaranty, and related instruments. On April 13, 2005, defendant Signature Properties, LLC (Signature) agreed, pursuant to a Fixed Rate Note, to pay to JP Morgan Chase Bank, N.A. (JP Morgan) the principal sum of $8,800,000.00, with interest (Note). To secure the Note, Signature executed a Mortgage and Security Agreement (Mortgage), with respect to commercial property known as 6 Shaw's Cove, New London, Connecticut, a three-story office building. On July 29, 2005, the Note, Mortgage, and Guaranty were assigned by JP Morgan to LaSalle National Bank Association, as Trustee (LaSalle), which, in October 2007, assigned them to SNL. See the court's memorandum of decision, dated February 3, 2010 (#349), pp. 1-2.
The court's docket reflects that the original plaintiff, J.E. Robert, filed a motion for substitution of party (#108) on October 18, 2007. In paragraph 1 of the motion for substitution, J.E. Robert stated that it acts as Special Servicer for La Salle. Paragraph 4 stated that LaSalle and SNL had executed an assignment, whereby LaSalle assigned to SNL the note, mortgage, and assignment of leases and rents, which were described in the complaint. A copy of that assignment, dated October 17, 2007, is attached as Exhibit C to the defendants' motion to dismiss (assignment). It is undisputed that, as reflected in the assignment, SNL became the holder of the Note and Mortgage on October 17, 2007.
In paragraph 5, the motion for substitution stated that SNL "is the proper party in interest and intends to prosecute this action once it is substituted as the plaintiff." No objection to the motion for substitution was filed. The motion for substitution of SNL as the plaintiff was granted by the court (Martin, J.) on November 5, 2007, more than three years ago.
In its previous memorandum of decision, dated February 3, 2010 (#349) (February 2010 decision), the court granted SNL's motion for partial summary judgment as to liability, concerning counts one through four of its first amended complaint, dated March 4, 2008 (#116). As set forth in the February 2010 decision, page 9, based on the undisputed facts, the court found that SNL is the owner of the Note and Mortgage.
In summary, the court also found that Signature defaulted in its payment obligations; that Signature breached Sections 4.3 and 8.2 of the Mortgage; that the nonrecourse provisions of Section 10(a) of the Note are null and void, the Note is a full recourse obligation of Signature, SNL is not limited to the security interests granted by Signature, Signature is fully liable for any deficiency judgment which SNL may obtain; and that the Guarantor defendants (Maureen Julian, Andrew J. Julian, Michael Murray, and Stephanie Lord Drake) are jointly and severally liable for Signature's full recourse obligation under the Note and Mortgage, including any deficiency judgment.
SNL seeks a judgment of strict foreclosure and a deficiency judgment. The Guarantor defendants' appeal from the February 2010 decision to the Appellate Court was dismissed for lack of ripeness on September 21, 2010.
In a March 1, 2010 memorandum of decision (#367), the court granted SNL's motions to strike. By decision issued concurrently herewith, the court has granted SNL's motion to strike the defendants' substituted and amended counterclaims and for entry of nonsuit as to the counterclaims (second motion to strike). Trial in this matter was scheduled to commence on July 6, 2010, but was postponed, in part because the pleadings were not closed.
On September 20, 2010 the parties appeared in court at a hearing concerning SNL's applications for prejudgment remedy and for preliminary injunction (applications), and its motion for disclosure of assets. The court heard testimony and received various exhibits in evidence. After the evidentiary portion of the hearing was concluded, the parties presented oral argument. Thereafter, the court stated that the applications and the motion for disclosure of assets were fully submitted for the court's consideration. The court also heard oral argument concerning the second motion to strike on September 20, 2010.
The motion to dismiss was filed shortly thereafter, on October 1, 2010. Due to the pendency thereof, the court necessarily held in abeyance its other decisions and rulings, which are issued today, concerning SNL's applications and its motions for disclosure of assets, to strike and for nonsuit.
Additional references to the background are set forth below.
II Standard Of Review
"The standard of review for a court's decision on a motion to dismiss is well settled. A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction . . . When a . . . court decides a jurisdictional question raised by a pretrial motion to dismiss, it must consider the allegations of the complaint in their most favorable light . . . In this regard, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader . . . The motion to dismiss . . . admits all facts which are well pleaded, invokes the existing record and must be decided upon that alone." (Internal quotation marks omitted.) Gold v. Rowland, 296 Conn. 186, 200-01, 994 A.2d 106 (2010).
"[S]ubject matter jurisdiction involves the authority of the court to adjudicate the type of controversy presented by the action before it . . . and a judgment rendered without subject matter jurisdiction is void . . . Indeed, [o]nce the question of lack of jurisdiction of a court is raised, [it] must be disposed of no matter in what form it is presented . . . The court must fully resolve it before proceeding further with the case." (Internal quotation marks omitted.) In re DeLeon J., 290 Conn. 371, 376, 963 A.2d 53 (2009).
"Trial courts addressing motions to dismiss for lack of subject matter jurisdiction pursuant to [Practice Book] § 10-31(a)(1) may encounter different situations, depending on the status of the record in the case . . . [L]ack of subject matter jurisdiction may be found in any one of three instances: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts . . . Different rules and procedures will apply, depending on the state of the record at the time the motion is filed." (Citations omitted; footnote omitted; internal quotation marks omitted.) Conboy v. State, 292 Conn. 642, 650-51, 974 A.2d 669 (2009).
"[I]f the complaint is supplemented by undisputed facts established by affidavits submitted in support of the motions to dismiss . . . the trial court, in determining the jurisdictional issue, may consider these supplementary undisputed facts and need not conclusively presume the validity of the allegations of the complaint . . . [W]here a jurisdictional determination is dependent on the resolution of a critical factual dispute, it cannot be decided on a motion to dismiss in the absence of an evidentiary hearing to establish jurisdictional facts." (Citations omitted; emphasis omitted; internal quotation marks omitted.) Id., 651-52.
Here, concerning the issue which is dispositive as to standing, as explained below, there are no disputed facts.
III Discussion
"Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless [one] has, in an individual or representative capacity, some real interest in the cause of action." Gold v. Rowland, supra, 296 Conn. 207. The burden of demonstrating that a party has standing to bring an action is on the plaintiff. See Seymour v. Region One Board of Education, 274 Conn. 92, 104, 874 A.2d 742, cert. denied, 546 U.S. 1016, 126 S.Ct. 659, 163 L.Ed.2d 526 (2005).
"Standing is not a technical rule intended to keep aggrieved parties out of court; nor is it a test of substantive rights. Rather it is a practical concept designed to ensure that courts and parties are not vexed by suits brought to vindicate nonjusticiable interests and that judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented." (Internal quotation marks omitted.) Burton v. Commissioner of Environmental Protection, 291 Conn. 789, 802, 970 A.2d 640 (2009).
Here, it is undisputed, and the court has so found, that SNL, the substituted plaintiff, is the holder of the Note and Mortgage. As discussed above, it is undisputed that it became the holder by assignment in October 2007.
The defendants argue that when a party has no standing to bring an action, no action is ever commenced, as it is void ab initio, and the jurisdictional defect cannot be corrected by substitution of the plaintiff. Thus, they contend that, if J.E. Robert, the original plaintiff, had no standing, the fact that the substituted plaintiff, SNL, does have standing, is immaterial, since the action is void ab initio. This contention is unsupported by the case law which is cited in their brief and flies in the face of Connecticut law about the effect of substitution in civil actions as it has developed since over a century ago.
In discussing the effect of the practice act and the changes wrought by it with respect to the joinder, admission, and dropping of parties to suits, the Supreme Court stated, in Bowen, Admin. v. National Life Association, 63 Conn. 460, 476-77, 27 A. 1059 (1893), "[t]he party so substituted is let in to carry on a pending suit, and is not regarded as commencing a new one. After he is substituted he is by the practice act treated and regarded for most purposes just as if he had commenced the suit originally. The writ, the complaint, the service of process, attachments made, bonds given, the entry of the case in court, the pleadings if need be, in short all things done in the case by or in favor of the original plaintiff, except so far as they may be changed by order of court, remain for the benefit of the plaintiff who succeeds him, as if done by and for him originally and just as if no change of parties had been made. So far as the defendant is concerned, the same suit upon the same cause of action, under the same complaint and pleadings substantially in most cases, goes forward to its final and legitimate conclusion as if no change had been made."
"[O]ur rules of practice . . . permit the substitution of parties as the interests of justice require . . . These rules are to be construed so as to alter the harsh and inefficient result that attached to the mispleading of parties at common law." (Internal quotation marks omitted.) DiLieto v. County Obstetrics Gynecology Group, P.C., 297 Conn. 105, 150, 998 A.2d 730 (2010) (quoting Federal Deposit Insurance Corp. v. Retirement Management Group, Inc., 31 Conn.App. 80, 84-85, 623 A.2d 517, cert. denied, 226 Conn. 908, 625 A.2d 1378 (1993)).
The Practice Book contains various rules which effectuate these principles. In the motion for substitution filed in this matter, J.E. Robert cited Practice Book § 9-22, which provides, "[a]ny motion to cite in or admit new parties must comply with Section 11-1 and state briefly the grounds upon which it is made." Practice Book § 9-20 also allows the addition of new parties, by substitution of the plaintiff, and provides, in relevant part, "[w]hen any action has been commenced in the name of the wrong person as plaintiff, the judicial authority may, if satisfied that it was so commenced through mistake and that it is necessary for the determination of the real matter in dispute so to do, allow any other person to be substituted or added as plaintiff."
"Thus, an amendment substituting a new plaintiff [will] relate back if the added plaintiff is the real party in interest. 6A C. Wright, A. Miller M. Kane, Federal Practice and Procedure [1990] § 1501, pp. [154-55, 157]; see also Health Research Group v. Kennedy, 82 F.R.D. 21 (D.D.C. 1979) (substitution of real party in interest as plaintiff permitted to cure lack of standing of original plaintiff)." (Internal quotation marks omitted.) DiLieto v. County Obstetrics Gynecology Group, P.C., supra, 297 Conn. 151. The substitution of a plaintiff "relate[s] back to and correct[s], retroactively, any defect in a prior pleading concerning the identity of the real party in interest." Federal Deposit Insurance Corp. v. Retirement Management Group, Inc., supra, 31 Conn.App. 84. Rather than finding that an action commenced by a plaintiff which lacked standing, which was substituted for by a plaintiff with standing, was void ab initio, the Appellate Court "has recognized the authority of a trial court to substitute a new plaintiff when the record showed that the original plaintiff had no standing to bring the action in the first place." Trevek Enterprises, Inc. v. Victory Contracting Corp., 107 Conn.App. 574, 579-80, 945 A.2d 1056 (2008).
In particular, the defendants do not claim that they have been prejudiced by the substitution. Obviously, SNL's claims arise from the same loan transaction on which the original complaint was premised. As noted above, when the motion for substitution was filed in October 2007, Signature did not object. It "cannot now claim that the substituted plaintiff is not the proper party." Investors Mortgage Co. v. Rodia, 31 Conn.App. 476, 481, 625 A.2d 833 (1993). As this court's docket reflects, the other defendants became defendants a few months later, and have filed a host of pleadings since then. The claimed lack of subject matter jurisdiction was not raised until the filing of the motion to dismiss in October 2010. At oral argument, the defendants argued that there was no finding here of commencement of the action by the wrong plaintiff as a result of mistake, as provided under Practice Book § 9-20 and General Statutes § 52-109, since the motion for substitution was premised on Practice Book § 9-22. This argument is without merit. In Investors Mortgage Co. v. Rodia, supra, 31 Conn.App. 476, the motion for substitution of the plaintiff was premised on then-Practice Book § 103, the predecessor to Practice Book § 9-22, not on Practice Book § 101, the predecessor to § 9-20. See id., 31 Conn.App. 481 n. 4.
Section 52-109 provides, "[w]hen any action has been commenced in the name of the wrong person as plaintiff, the court may, if satisfied that it was so commenced through mistake, and that it is necessary for the determination of the real matter in dispute so to do, allow any other person to be substituted or added as plaintiff."
The court next turns to the decisional law cited by the defendants in support of their argument, that when a party has no standing to bring an action, no action is ever commenced, as it is void ab initio. See defendants' memorandum of law, pp. 12-13.
The defendants' reliance on Stroiney v. Crescent Lake Tax District, 197 Conn. 82, 86 n. 3, 495 A.2d 1063 (1985), is misplaced. Stroiney concerned an appeal which was dismissed for lack of jurisdiction, due to lack of a final judgment in the trial court. See id., 86. The Supreme Court determined that the appellant's subsequent acts did not cure the defect, and that the appeal was void ab initio. See id., n. 3. Stroiney is inapplicable here as it did not involve a ruling on the effect on an action of substitution of a party plaintiff, pursuant to the rules of practice, in the trial court, to cure an original plaintiff's lack of standing. See Zamstein v. Marvasti, 240 Conn. 549, 555-57, 692 A.2d 781 (1997) (explaining and distinguishing Stroiney). Similarly, the defendants' citation of American Factors, Inc. v. Foreign Intrigue, Inc., 6 Conn.App. 656, 657-58, 506 A.2d 1085, cert. denied, 201 Conn. 802, 513 A.2d 696 (1986), is unavailing for the same reason.
The defendants' reliance on Golden Hill Paugussett Tribe of Indians v. Southbury, 231 Conn. 563, 570-71, 651 A.2d 1246 (1995), is equally misplaced. There, the trial court's dismissal of the action was affirmed, since the person bringing suit on behalf of the Indian tribe lacked authority to do so. See id., 567-78. The portions of Golden Hill cited by the defendants discuss jurisdiction and standing. No determination was made concerning the effect of substitution of a party plaintiff in order to address a defect in standing of the original plaintiff.
America's Wholesale Lender v. Silberstein, 87 Conn.App. 485, 488-89, 866 A.2d 695 (2005), cited by the defendants, also is not applicable here. There, the Appellate Court determined that General Statutes § 52-109 did not apply since the action was not commenced by a "person" possessing the legal capacity to sue. See id. Rather, the action was commenced in the name of a trade name, and "a trade name is not a recognized legal entity or person." Id., 489. "The named plaintiff in the original complaint never existed. As a result, there was no legally recognized entity for which there could be a substitute." Id. In that situation, "because America's had no standing to bring an action, no action in this case ever was commenced, as it was void ab initio." Id.
Here, in contrast, as alleged both in the original complaint and in the amended complaint, paragraph 1, J.E. Robert is a Virginia corporation. The defendants have not disputed this allegation. J.E. Robert is a legally recognized entity, not a fiction. Under these circumstances, the decisional law discussed above, which provides that substitution of a plaintiff with standing relates back to the commencement of the action, applies.
In addition, recent cases cited by the defendants, Deutsche Bank National Trust Co. v. Bialobrzeski, 123 Conn.App. 791, 798, 3 A.3d 183 (2010), and LaSalle Bank, N.A. v. Bialobrzeski, 123 Conn.App. 781, 789, 3 A.3d 176 (2010), also are unavailing. The issue in both involved a determination as to whether the plaintiff was the owner or holder of the note when the action was commenced. See Deutsche Bank v. Bialobrzeski, supra, 123 Conn.App. 799-800; LaSalle Bank, N.A. v. Bialobrzeski, supra, 123 Conn.App. 790. Neither involved a ruling on the effect of substitution of a party plaintiff, pursuant to the rules of practice, to cure an original plaintiff's lack of standing.
Also not applicable is Fleet National Bank v. Nazareth, 75 Conn.App. 791, 794-95, 818 A.2d 69 (2003), where the substituted plaintiff was not the holder of the note.
The court concludes that the substitution of SNL as plaintiff in November 2007 cured the alleged lack of standing of J.E. Robert. See DiLieto v. County Obstetrics Gynecology Group, P.C., supra, 297 Conn. 151; Trevek Enterprises, Inc. v. Victory Contracting Corp., supra, 107 Conn.App. 579-80. This action is not void ab initio. The court does not lack subject matter jurisdiction.
Accordingly, the court need not consider whether J.E. Robert had standing to bring this action. Likewise, it need not address SNL's argument concerning the applicability of General Statutes § 52-123.
The belated filing of the motion to dismiss, almost three years after the substitution of SNL as plaintiff, long after summary judgment was granted as to liability in February 2010, and just after the appeal from that decision was dismissed in September 2010, and just after the court held the hearing on the prejudgment relief sought by SNL; coupled with the lack of support for the defendants' contention that this action is void ab initio, makes it evident that the motion to dismiss was presented as a delaying tactic. Practice Book § 4-2(b) proscribes such tactics, since the signer of a pleading certifies that "it is not interposed for delay . . ."
CONCLUSION
Based on the foregoing reasons, the defendants' motions to dismiss are denied.
It is so ordered.